Settling for Success in Implementing T+1

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22 January 2024

Unraveling the Impact of Shortened Settlement on Capital Markets Firms


In May 2024, barring any further delays, the United States and Canada will be shortening their trade settlement cycles from a two-day settlement to a one-day settlement (T+1) cycle.This move represents a significant shift in the financial markets, andwill impact various stakeholders including asset managers, brokers, global custodians, and financial market infrastructures (FMIs) across the entire transaction lifecycle of U.S. dollar-traded securities.While these firms are preparing to comply, the levels of readiness vary, especially at smaller institutions and those domiciled outside of the United States. The fundamental trade settlement process itself is not changing; however, the time it takes to settle a trade and fix any errors preventing its settlement will be compressed. This means that any manual processes could stand in the way of faster settlement and result in failed transactions.Communication and workflows from the front-office through to the back-office, and between fund managers and their counterparts need to be as straight-through as is possible.While this has been a topic of analysis across operations managers for decades, now is the time to realize those ambitions.And it is important to understand that this is not just an operations issue, nor is it just a buy-side problem. All market participants have a critical role to play in achieving T+1 compliance.

Figure 1: The Impact of T+1 on Stakeholders